Bank lent £660m to buy Nama debt

THE BARCLAY brothers guaranteed £260 million of loans from Barclays Bank to buy £660 million of debt from Nama due on the London Maybourne hotels.

The UK bank agreed to lend £660 million (€794 million) to Maybourne Finance, a company owned by Sir David and Sir Frederick Barclay, to buy the debt on the hotels from the State agency.

The bank sought the guarantees as it believed that Coroin, the company behind the hotels, could only support senior debt of £400 million given that its annual cash earnings stood at £46 million.

Phil Peters, a Barclay brothers executive and a director of Maybourne Finance, said in his witness statement that the bank’s loan of £660 million was also given on the basis that the brothers had a plan to take control of the hotels. The bank’s credit committee agreed to lend the money to Maybourne Finance on these conditions on September 15th, 2011, and the debt was acquired from Nama on September 27th.

Mr Peters told the court that the brothers’ firm made a profit on the difference between the £48.1 million cost of the borrowings paid to Barclays Bank and the £49.6 million that the firm charged Coroin.

Maybourne Finance also paid £19 million to Barclays Bank for arranging the loan, he said. From a cash-flow point of view, the company had “not negotiated terribly well”, he said.

Michael Seal, a Barclay brothers executive, told the court he resigned as a director of Maybourne Finance on June 14th, 2011, as there might have been conflicts arising over his role as a director of Coroin given the discussions over loans to buy the hotels’ debt.

Responding to queries from counsel for Irish businessman Paddy McKillen, Mr Seal said it was “always a possibility” that the purchase of the debt might involve an appropriation of assets if the lender was not repaid.

Mr McKillen is challenging the Barclays brothers, claiming their purchase of the debt from Nama was unlawful and a means to oust him as a shareholder. Mr Peters said in his statement that he and Aidan Barclay told Nama in a meeting in January 2011 that they may revert to the agency on whether it was interested in selling the debt.